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The Internal Revenue Service has released guidance on a safe harbor easing penalties for reporting errors on information returns.

Notice 2017-09 provides requirements for making an election related to information returns and seeks comment on the matters discussed in the notice. Section 202 of the Protecting Americans from Tax Hikes Act of 2015, also known as the PATH Act, amended the tax code so an error on an information return or payee statement does not need to be corrected to avoid a penalty if the error relates to an incorrect dollar amount and differs from the correct amount by no more than $100 (or $25 with respect to the amount of tax withheld).

The IRS cautioned Wednesday, however, that the safe harbor generally does not apply to a payee statement if a payee makes an election that the safe harbor not apply “at such time and in such manner as the Secretary may prescribe.”

Michael Chittenden, a counsel in the Employee Benefits and Tax Practices at the law firm Miller & Chevalier, wrote about the new guidance in a blog post Wednesday. “Under the statute, filers are not subject to penalties under either Section 6721 and 6722 if an amount reported on the return is within $100 of correct amount or within $25 if the amount is an amount of tax withheld,” he explained. “However, if the payee requests a corrected return, the filer must file and furnish one or the payee is liable for potential penalties. Prior to the enactment of the PATH Act, any error in an amount was considered consequential and could result in a penalty—even if the error was only once cent. With this change, de minimis errors no longer necessitate corrected information returns or payee statements. The safe harbor is effective for information returns and payee statements required to be filed after December 31, 2016.”

He noted that the safe harbor will not apply in case the error is intentional or if a payor fails to file a required information return or furnish a required payee statement. “In other words, a filer cannot use the safe harbor to increase the filing threshold for reporting by arguing that the amount that should have been reported was within $25 of a threshold,” Chittenden wrote. “Accordingly, if a filer determines that a Form 1099-MISC was not required because the amount paid to the payee was $550 and later determines the amount paid was actually $650, the safe harbor would not apply. Similarly, filers cannot apply the safe harbor to avoid penalties for payees of interest of less than $100 for whom they did not file a Form 1099-INT because the filer incorrectly believed the interest paid was less than $10.”

Michael Cohn

Michael Cohn, editor-in-chief of, has been covering business and technology for a variety of publications since 1985.